The findings comes from a survey of early years providers by the Early Years Alliance, which received 1,600 responses.
Increases to the national minimum wage (NMW) and national living wage (NLW) come into force tomorrow (1 April).
Over two-thirds of respondents (70 per cent) said their funding rate is lower than the cost of delivering the ‘free’ entitlement to three- and four-year olds.
The Alliance said it was 'now inevitable' that, without urgent action on funding, the early years workforce and families would suffer, with parents paying more for childcare and more settings closing.
Of those who answered questions about financial viability and the impact of funding rates, 12 settings confirmed to the Alliance that they were closing.
Two in five providers (44 per cent) said the increase in the national and minimum wages may mean they may have to close in the next 12 months.
The early years organisation urged ministers to make sure that funding keeps pace with rising costs.
It says that current Government funding levels for early years education are based on a cost analysis in 2015 using data from 2012-13, and do not take into account any subsequent cost increases, such as business rate hikes, new employer pension contribution rules and consecutive annual minimum wage rises.
Worryingly, the report found that 81 per cent of respondents said that financial viability was having a negative impact on their stress levels and mental health. Six respondents said they had had thoughts of ending their own life.
- 9 in 10 providers (88 per cent) warned that, if their funding rate stays the same next year, it will have a negative financial impact on their provision.
- Two thirds (67 per cent) of respondents have already increased parent fees for non-government funded hours in the past 12 months.
- 42 per cent say they are likely or very likely to cut staff numbers over the next 12 months. Of those, 90 per cent say this is due either entirely or in part to the rising national living/minimum wage.
- Parents returning to work after parental leave could see increased fees - more than half of the survey’s respondents (53 per cent) warned childcare prices would also go up for very young children.
Nicola, a survey respondent said, ‘At the end of 2018, we had a higher than normal number of children in our setting with behavioural issues, and we wanted to employ a further member of staff to help with one-to-one support for those children. That wasn't financially possible, and although the staff in the setting coped admirably, it placed a massive strain on them.
'They worked additional unpaid hours most days to complete paperwork and meet with parents, because there wasn't the time or resource during sessions. During the whole term their morale was low and they were exhausted. The stress was evident; one member of staff has since decided to leave our setting to focus on her family, and another has reduced her hours.'
IMPACT OF WAGE RISES
When settings were asked about other specific measures they expect to take as a result of the upcoming increase to the National Minimum and National Living Wages:
- 63 per cent expect to increase parent fees for non-funded hours taken up by two-, three- and four-year-olds.
- 53 per cent expect to increase fees for younger children who don’t receive funding.
- 19 per cent expect to restrict the sessions parents can use for funded hours.
- 40 per cent expect to introduce or increase additional charges for goods and services such as lunch, snacks and trips.
- 70 per cent expect to spend less on equipment and resources.
- 15 per cent expect to take on less children with special educational needs and disabilities (SEND).
A total of 1,615 nurseries, sessional pre-schools, childminders and out of hours clubs took part.
Of those who answered, 91 per cent offered funded hours for two-year-olds, 96 per cent offered funded 15 hours for three- and four-year-olds, and 87 per cent offered the funded 30 hours for the same age group.
Neil Leitch, chief executive of the Early Years Alliance, said, ‘The Government has walked the early years sector to a cliff-edge and only the Government can pull us back.
‘This survey lays bare just how disastrous government inaction on childcare funding has been: it’s led to increased prices for parents and continues to leave providers with no choice but to close. Beneath these headline figures there are hundreds of stories of people at risk of losing their livelihoods having dedicated their career to giving children the best possible start in life and thousands of families simply being priced out of quality childcare.
‘We should be celebrating a pay increase for our dedicated workforce – but for most providers this is just the latest in a long list of mounting costs they are expected to absorb without a corresponding increase in government funding. This simply can’t go on.'
‘The nursery is struggling to cover the wage increase and with the impending additional rise from April 2019 the current financial state of the organisation is looking bleak.
‘It is increasingly difficult to find suitable new employees so while the wage rise is very much deserved and long overdue (incentive to join the workforce) it is having a negative impact on the quality of service we can offer; working at minimum ratio, cutting budgets for resources etc. I meet regularly with the parent committee trying to find new ways to fund and keep open. The nursery has been open for 50 years in 2020 and has never experienced such an uncertain future.
‘I have worked in early years for 20 years and the last five years have been increasingly stressful. Every night is a sleepless night, my own family suffer due to my workload and mood swings. I have almost constant headache and my husband has recently expressed concern over the amount of painkillers I take. I constantly have to juggle weekly budgets and daily ratios, often sending staff home if a child calls in sick to save money on wages. I cannot guarantee/assure staff that their position at the nursery is secure which then impacts on their own health and well being resulting in anxiety and often leaving to seek other employment (not in childcare) or sick leave.’